Q2 2021 Natera Inc Earnings Call

[music].

Welcome to the materials 2021 second quarter financial results conference call at this.

Time, all participants are in a listen only mode.

Following management's prepared remarks, we will hold a Q&A session.

I'll ask a question at that time. Please press star followed by 1 on your Touchtone phone.

If anyone has difficulty hearing the conference. Please press star zero for operator assistance.

As a reminder, this conference call is being recorded today August that 'twenty 'twenty 1.

I would now like to turn the conference over to Michael Brophy Chief Financial Officer. Please go ahead.

Thanks, operator, good afternoon. Thank you for joining our conference call to discuss the results of our second quarter of 2021 on the line is Steve Chapman, our CEO and Paul Billings, Our Chief Medical Officer, Solomon Boskovich General manager of oncology will be joining for Q&A as he's dialing dialing in from overseas. So Steve will give his prepared remarks.

<unk> today.

Today's conference call is being broadcast live via webcast, we will be referring to a slide presentation that has been posted to investor Natera Dot com a replay of this call will also be available at Investor Dot Natera Dot com.

During the course of this conference call, we will make forward looking statements regarding future events and our anticipated future performance, such as our operational and financial outlook and projections, our assumptions for that outlook market size partnerships clinical studies opportunities and strategies and expectations for various current and future products, including product.

Abilities expected release dates reimbursement coverage and related effects on our financial and operating results. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to the documents we file from time to time with the SEC, including our most re.

<unk> form 10-K, or 10-Q, and the form 8-K filed with today's press release.

Those documents identify important risks and other factors that may cause our actual results to differ materially from those contained in or suggested by the forward looking statements forward looking statements made during the call are being made as of today. This call is replayed or reviewed after today. The information presented during the call may not contain current or accurate information that Terry disclaims any.

To update or revise any forward looking statements. We will provide guidance on today's call, but will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum.

We will quote a number of numeric or growth changes as we discuss our financial performance and unless otherwise noted each such reference represents a year on year comparison, and now I'd like to turn the call over to Steve Steve.

Thanks, Mike Good afternoon, everyone and thank you for joining us let's get into the recent highlights.

As we covered in our pre announce we had another phenomenal growth quarter Q2 was the fastest year on year growth from both volumes and revenues we've had as a public company and that's on a volume base that is now more than 4 times larger than when we went public.

I'm pleased to announce that we've exceeded the top end of our pre announcement ranges in units processed total revenue and product revenue.

We processed 376000 tests in Q2, which was approximately 61% growth over the same period last year total revenues and product revenues were both up 64% and approximately 71% respectively over the same period last year net acts.

Celebration is being driven by continued strong growth in the women's health business and big contributions from <unk> oncology and transplant.

And those businesses are now large enough to contribute meaningfully and really shift our growth rates upward.

Given all this momentum we are excited to be raising the revenue guide for a second time. This year. We started at 500 to 525 million then up that range to $550 million to $575 million in May we are now raising our guidance once again to 600 to 602.

<unk> million dollars in revenues for this year up almost $100 million versus where we started in March.

As we are having success with our new product launches. We're also needing to accelerate investments we had planned to make over the next 2 years, which we are very happy to do Mike will cover the full guide later in the call.

We were also very excited to see the women's health business got to cash flow breakeven in the quarter. This was 1 of the top goals I announced when I took over as CEO in 2019, and I'm proud that our team achieved this while simultaneously hitting record growth rates.

In oncology, we are continuing to generate high quality evidence. We now have 14 peer reviewed publications with many more on the way. We're also excited to see the quality of evidence is progressing shifting away from validation studies and focusing on outcomes data like overall survival. For example, we recently had 4.

Newly published or presented prospective trials, where outcomes data is available, including 3 trials. It measured overall survival and 1 that showed signature is predictive of treatment response. We believe these prospective trials with outcomes data is a significant step towards full adoption of MRV.

Testing by physicians and professional societies. These studies have taken years to reach this stage and we think there's clearly differentiate signature in the market and lays the groundwork for broad reimbursement and adoption.

We were also very pleased to announce another high quality study yesterday that we think has the potential to unlock a new and large indication of breast cancer. The first patient has now been screened in a prospective multi site definitive zest trial, a new phase III study with GSK they will evaluate the.

Efficiency of Niraparib in 800 breast cancer patients are being monitored with Cigna Terra after adjuvant treatment.

<unk> received a breakthrough device designation from the FDA for this study and I will go over the details of this trial later in the presentation.

We've also made several key commercial strides with Cigna Terra in the quarter, our direct sales channel team is performing very well and it's in the launches accelerating we also launched with foundation medicine, and the pharma sector and with BG I in China. Each of these partners enables us to impact patients in a way that we would not have been able to reach.

Each on our own Foundation Medicine currently has a substantial number of pharma partnerships.

And we believe as the market leader in tissue clinical volumes every year.

<unk> is a leading diagnostics player in China.

And is it from middle commercial channel and reimbursement expertise in that country. Both of these commercial launches are in the early stages and will take some time to get going but we think each can contribute to <unk> growth in the coming years.

We also had a major win on a reimbursement front. When we were awarded a D. L. T status for signature, which moves a recurrence monitoring Medicare reimbursements from $7.95 per test to $3500 per test.

Finally, as most of you know we've completed a follow on equity offering that brought in roughly a net $551 million, we launched with a $350 million offering and were able to substantially upsize the raise in the process due to the strong response, we received from investors as we will describe.

We think we have a lot of high return projects to fund and we look forward to putting the capital to work I'll spend more time on all of these developments later in the call.

Okay, let's drill into the unit growth on the next slide I think this longer term historical view is great because it gives a sense of what our experience with Q2 has been in the past Q2 has historically been slightly down sequentially versus Q1, driven by the seasonality in the women's health business.

Q1 is typically very strong and Q2 is a lot softer for our existing accounts. This year as you can see in the Q2 bar on the far right something different is happening first the growth in our women's health business has accelerated to a level that is now completely overcome the negative impact of seasonality, we traditionally see in Q2.

We are benefiting from our smart trial data that was read out in January which sets a new bar in quality and size for AIP key validation data and we're benefiting from the joint Ecogen SMS on practice Bulletin recommending <unk> for all pregnant women. We think we're clearly in the early stages of expanding from roughly 1.5.

<unk> in the United States to what could be more than $4 million in IP teams over time.

Second the growth rates are compounded by the fact that our product launches and transplant and oncology are exceeding our internal expectations on a scale is requiring us to accelerate capacity build out and hire across the operations teams signature of volume is growing nicely as we add new accounts every month and initiate more new patients.

For CRC in Io monitoring, we look forward to highlighting a few case studies later in the call.

On the next slide you can see that the volume growth is clearly translating to revenue growth as well, particularly in product revenues. We saw a nice increase in the blended asps in the business over Q1, which continues a multi quarter trend and going back to last year, while women's health Asps were up modestly over Q1 most of it.

The sequential improvement was really driven by the volume mix since a transplant and oncology products have higher prices I think that's a good sign for the rest of the year as Mike will describe later on the call. We still think there's room for ni PTA asps to improve in the second half based on the broader reimbursement trends, we're seeing particularly as we make steady progress.

With state Medicaid plans.

Yeah.

Some of you will recall when I was first name CEO in January of 2019, I set a top goal for the company, but you get the women's health business to cash flow breakeven. Since then we've been very disciplined in our investments in that business, we've grown the asps and we've reduced the cogs, while continuing to rapidly grow our volumes. So despite all the upside.

We still have ahead of us in women's health, we estimate that now we are sustainably cash flow breakeven in that part of the business.

That's an important case study for the overall company. We have now shown that once we make the necessary investments to establish the product and commercial channel. We can deliver continued growth, while optimizing cost and being efficient with R&D and the sales team as the volume growth in the new businesses, we continue to benefit from the cost synergies by tapping into the scale.

And expertise across our broader company in the future. We can also apply several of the same cogs and operational savings strategies to the new businesses as well.

Okay. So now let me move to Oregon Health.

We are tracking above our internal expectations for prosperity and we believe the transplant market is still in the early stages of overall adoption with a lot of room for future growth. In addition to growing our volumes, we're continuing to generate new evidence.

Last week, a new study from UCLA was published in transplantation reports in this study the investigators ran both prosperity and a competitive test on 15 patients 6 of whom ultimately experienced a rejection using the validated 1% cutoff. The prospera test correctly identified 5 out of 6.

Rejections vs..4 out of 6 for the competitor. This data is similar to a previously reported head to head study, where the prosperity tests detected more cases of rejection than a competing test using the validated 1% cut off.

In addition to the recent head to head study. We were also pleased to see prosper performed extremely well in a cohort of patients that received a simultaneous pancreas and kidney transplant. There are often referred to as S. PK patients it's important to perform well in this cohort because multi organ kidney transplants make up 8.

<unk> of all kidney transplants, and these patients experienced a 15% rate of rejection in the first year post transplant.

On the right side of the slide is the data that was presented at the ATC conference in June and a cohort of 39 simultaneous pancreas in kidney transplant recipients plus so low pancreas transplant recipients <unk> performed very well across all testing metrics delivering solid performance across the board.

Testing S. PK patients allows us to help a new sector of the population it is important to our transplant physicians.

In addition, this study as evidenced across Farah could perform well in organ types beyond kidney transplant patients. For example in this study we performed well on solo pancreas transplant patients. In addition to the PK patients.

As we talked about in May we think the pathway to reimbursement in a broader range of organ transplants with substantially opened up by the CMS local coverage decision that was published in the spring. This is very important for us because it lays out an efficient path to gain reimbursement in organs beyond kidney as we showed above we're now seeing early evidence.

Our test works well in other organs, such as pancreas transplant recipients. This LCD aspect is expected to be active later this year and we're keeping our eye on whats happening here.

Alright, let's transition to oncology, we've now published on senior Terra in 14 peer reviewed publications. The validation data supports initial adoption and reimbursement as we have now demonstrated the analytical and clinical performance of the test across a broad range of cancer types I mentioned the shift to prospective studies with outcomes day.

At the top of the call. This includes some very large perspective real world Interventional studies as well like to circulate trial. The studies are critical differentiators because they are larger designed to change practice guidelines and they take years to mature it's important to see the test performance hold up and the perspective real world setting where the folk.

Shifts to verifiable patient outcomes, rather than analytical performance metrics. We started these more significant trials years ago, and we're now starting to see that work come to fruition as they read out.

First we were recently excited to present updated data at the ESMO Gi conference from the perspective real World Interventional circulate trial. There are now more than 2000 patients enrolled in the study with 6 months of follow up available for the first 800 patients. We've maintained the high pre surgical detection and longitudinal sensitivity and specificity.

Need to relapse from a validation studies in this perspective real world setting and we finally got a substantive look at the initial outcomes data based on MLR day status, we were ecstatic to see that more than 99% of patients who are <unk> negative remain disease free at 6 months median time point.

Regardless of whether they receive adjuvant chemotherapy or not this is a huge step forward and I'll explain why on the next slide.

There is a key clinical utility question that needs to be answered in stage III colorectal patients can we avoid giving chemotherapy for MRV negative patients today in stage III colorectal cancer, nearly 100% of patients get adjuvant chemotherapy, but about 50% of patients don't need it because they are.

Cured by surgery alone.

1 of the biggest objections, we get from doctors is that they aren't ready to stop giving chemotherapy to stage 3 patients which would be against the NCC Inc. Guidelines.

Agree MRV testing today can be helpful. In stage III colorectal to decide between 3 months versus 6 months of adjuvant chemotherapy, but what they really want is to constantly avoid giving chemotherapy to <unk> negative patients.

Circulate trial was designed to test this hypothesis that <unk> negative patients can safely be escalated.

From chemotherapy actress surgery on the left you'll see a diagram of the patient flow in the circulate trial and the bottom arm. Each MRV negative patient is randomized to receive standard of care adjuvant chemotherapy or not we believe the study will ultimately show that there is no benefit to receive adjuvant chemotherapy for patients who are <unk> negative.

The interim disease free survival data strongly suggest that we are on track to validating that hypothesis, which could be a game changer. This is a type of trial that can change guidelines and unlock 1 of the big clinical use cases that physicians are asking for an indication where doctors simply won't use the test without this level of high quality outcomes day.

<unk>.

Since this trial was initiated 3 years ago. We believe this data will further differentiate us from further entrants in the market.

We anticipate the results of the MRV negative stratification will be presented for the first time at <unk> Gi in January of 2022, if that reads out as we anticipated that will be a defining moment for signature in colorectal cancer and we look forward to seeing the data.

Okay.

Deepening our data trove in colorectal cancer is 1 of our core strategies and in addition to the new Deescalation indication described above we also recently published a prospective trial in stage for colorectal cancer that showed excellent performance, including overall survival results unlocking another layer of colorectal utility.

Beyond stage, 2 and 3.

This paper published in the journal of clinical oncology precision oncology wasn't analysis from the perspective predator clinical trial. Following a 112 patients with stage 4 disease, who underwent surgery with curative intent.

The first time 30 days post surgery from a single time point alone we had sensitivity to relapse of 72%. This increased to 91% when we were able to test a second follow up blood draw on those patients who did not receive adjuvant chemo.

In addition, 96% of patients who are net negative at a single time point. After surgery were still alive at the end of clinical follow up which lasted up to 54 months that compares to just 52% overall survival for patients that were signature are positive the overall survival rate increased to 100% when <unk>.

<unk> patients who remained MLR net negative.

Negative and the longitudinal setting.

This paper addresses an important unmet clinical need since guidelines are currently vague on which stage for colorectal patients should receive adjuvant chemotherapy. After surgery with curative intent is it's currently recommended to monitor these patients closely for early signs of recurrence.

On the basis of this publication, we have already submitted to Medicare to expand coverage under the current LCD to include stage for ligand metastatic patients, we expect which we expect may come in late 2021 or early 2022.

As a reminder of the opportunity here as sizable as we estimate there are about 10000, new diagnoses per year in stage 4 Lugo metastatic colorectal cancer with a testing frequency similar to CA, leading to a tam of approximately 100000 tests per year, which is sizable from historical standards.

We're really proud of the studies, we generated and we believe the shift to outcomes data, including perspective overall survival data will retract patient outcomes for nearly 5 years and confirming once validation data in a real world interventional setting is important to further penetrate the clinical market and get reimbursed at scale.

Okay.

We were also proud to see another prospective publication with overall survival data this quarter.

In nature with.

With the excellent results from the phase III and Viger <unk> muscle invasive bladder cancer trial that we did with Genentech. This trial was a major effort conducted over 7 years to evaluate whether <unk> immunotherapy drug achieves Elizabeth could improve outcomes in the adjuvant muscle invasive bladder cancer patients.

We're reading out the data genentech pre specified and endpoint to evaluate patient response patients who were signature positive. After surgery. In addition to the all comers format originally designed.

When the trial failed to meet its primary endpoint in all comers, we reported a significant treatment benefit and Cigna Tara <unk> positive patients that received a teaser lizabeth and no treatment benefit in the <unk> negative patients. This study showed that signature is predictive of treatment benefit in this setting there.

This predictive claim is very difficult to make and it can only be achieved through a high quality study such as this 1.

In addition to our predictive claim we reported perspective data showing <unk> negative patients have a much better overall survival net MRV positive patients.

Based on the strength of these results Genentech has already started enrolling patients in a sequel phase III trial in vigor <unk>, 1 that will randomized to <unk> versus placebo among only those patients who test signature positive. After surgery demand is now growing quickly across pharma and academic.

<unk> to incorporate signature as a companion diagnostic in their pivotal randomized trials.

This week, we announced our second major phase III drug trials. The zest trial. This is a randomized multi center placebo controlled study sponsored by GSK to evaluate their PARP inhibitor niraparib in 800 patients with early stage, either triple negative breast cancer or HR positive her too.

Negative BRCA mutated breast cancer.

Patients who test positive after standard of care definitive treatment will be randomized randomized to receive niraparib versus placebo. If this trial is successful it could create a potential potentially life saving new treatment option for patients who test positive in this setting.

The study results will provide support for doctors to prescribe this treatment in their office broadly, which would be incredibly powerful for overall clinical adoption of Cigna Tara.

Some indications like breast cancer, our best approach to these types of pharma partnerships, because the clinical utility in breast cancer recurrence monitoring depends on new treatments being administered at the time of molecular recurrence and that's not something a laboratory can generally take on by itself. So we're glad to be winning these types of big treatment on <unk>.

<unk> current trials, which will unlock future clinical indications for Cigna Tara.

This project was made possible by the strong validation data. We previously published your breast cancer, including both the paper in clinical cancer research in the I spy 2 data published in Annals of oncology.

Okay, staying on Medicare for another minute as we mentioned at the top of the call. We had a major breakthrough. This summer when signature was awarded in the <unk> status before this 1 patient completed their adjuvant treatment.

Treatment monitoring period and entered recurrence monitoring our pricing for signature had been set at $795 per time point now with the <unk> status. The reimbursement rate is $3500 per blood draw for Medicare patients.

And we think this can be relatively stable over time.

Given the nature of the longitudinal monitoring overtime, a higher and higher percentage of blood draws will fall into this.

Category, which bodes well for the overall gross margin in the long term.

<unk> status is designed to reward innovation and the relevant statute requires several criteria to be met.

Test must be unique in the marketplace satisfying a clinical need that no. Other commercially available test can address and also must employ a methodology thats based on a unique empirically driven algorithm.

Signature met the stringent criteria and we believe it will be difficult for any other future MLD competitor you achieved this status, adding to our first mover advantage. This also gives us an important lever when contracting with commercial plans in the future and it helps our pharma business since net terra is extending its commercial leadership in MRV.

Which makes us more attractive as a companion diagnostic partner.

Finally, looking forward, we are eagerly awaiting the finalization of our draft LCD for immunotherapy monitoring, which we expect to come through some time earlier. This year. We've been pleased with the initial adoption in this setting further validating our belief that signature can help inform difficult treatment decisions for patients receiving <unk>.

From a therapy, where standard imaging tools can be uninformed Dave.

The final slide highlights some of the near and longer term indications, we're targeting with Cigna Tara in the past, we focus decided exclusively on the near term indications on the left hand side of the page. These are indications, where we've already generated excellent data and the clinical utility and use cases are very.

Clear and we have line of sight to reimbursement with CMS and commercial launches in the near term.

There's near term indication stack up about to about 4 million tests per year, which is incredible from historical standards. This is roughly 10 times larger than the 400000 tests per year in the traditional therapy selection market for example.

However, despite this tam being incredibly large from historical standards. This is just the beginning where several pivotal random randomized trials now underway in colorectal bladder breast and others sponsored by pharma and leading academic consortia and with a strong pipeline of additional trials that may launch in the next 12 months.

18 months, it's clear that some very large opportunities are beginning to stack up in both the U S and globally, including in Japan.

We're simply looking at what we signed so far or have in front of US we have a path to coverage of up to an additional 9 million tests per year.

This is exciting because although we're having significant growth now and we have an excellent runway to success in the near term I could easily make the case that cigna Terra is really only scratching the surface adjusted at the beginning and we could really hit full stride in the middle of this decade and beyond as these very large pivotal.

<unk> readout.

So theres a lot of upside in the future.

Finally, not on this slide but important to our mission. We were proud of this quarter at 2 patient case studies were reported out in the national media from different providers in different parts of the country.

1 colorectal case was reported on Npr's herein now broadcast in 1 breast cancer case reported on Abcs. Good morning America, we want to thank those patients Bonnie and Morrell and their physicians for sharing how signature have made an impact in their journeys.

Okay now, let me hand, it over to Mike to discuss the financials Mike.

Thanks, Steve The next slide here is just a summary of the financial results from the quarter, Steve covered a lot of the trends on volumes and revenues I'll. Just note again the acceleration we saw on the top line our year on year volume growth rate was 48% in Q1, and now 61% of Q2 product revenue year on year growth was 36%.

In Q1 and up 71% in Q2.

<unk> stepped up in the quarter and as Steve mentioned more of that increase was really driven by volume mix as the new higher price products start to have more of an impact on our blended average selling price women's health Asps were also slightly higher in the quarter and as Steve mentioned I think we still have room to run over the next several quarters there were.

Got a substantial boost from improved reimbursement and our commercial insurance volumes. If you compare where we are now on asps.

Versus this time last year in the women's health business and we've had some positive contracting decisions that we think can benefit the reimbursement for example in our managed Medicaid volumes over the next few quarters in women's health.

I think it's important to note that we think there is significant upside from the current oncology Isps, which can improve over time, just as the product launch matures, while the majority of our volume is in the colorectal cancer indication, we have seen many community oncologists really adopt cigna tear up for a broader range of cancer types, we are happy to.

See that because we think the data supports broad use and we think we have clear line of sight to reimbursement in additional cancer types.

<unk> local coverage decision from CMS.

As we've discussed in the past, we anticipate getting coverage for immunotherapy response monitoring this fall when that umbrella local coverage decision goes live.

And then we think coverage in additional cancer types can come from a more streamlined process of just submitting the data but for now we're taking a lot of zeros at the moment as the launch progresses. We also haven't yet gotten the benefit from the ADL T designation, which at least for our Medicare reimbursed volumes should be a lift in the second half.

The story on the cost of goods sold per unit is really very similar the Cogs for the woman health business are looking very good for example in IDT now is in the $160 range per unit and we see a path to an ITT cogs below a $125 per unit over time.

In oncology, we are just at the start of the roadmap to drive Cogs improvements. The first step is just to build out more capacity, we significantly brought forward investments to build out lab space to accommodate both the clinical demands and also specialized capacity designed to meet the needs of the larger phase III trials, we are now running for.

Pharma none of this scale up work carried significant technical risk and the volume trajectory. We are on makes the return on capital map very clear. It does however require significant near term capex and hiring in both the R&D and lab operations areas of the business. So the gross margins in the quarter really refer.

In the past.

What other line to note on this slide is the balance sheet, Steve reference the equity offering in which we raised roughly $550 million in an upside of the deal.

We raise that capital for 1 key reason, we have a lead in this very large recurrence monitoring markets and we are going to make all the necessary investments in the near term that sets up from long term success.

Okay. So I think that gives you some background for the guide on the next page we are significantly stepping up both of revenues and the investments for the balance of the year as Steve mentioned, we are now guiding revenues about $100 million higher than when we started just a few months ago in March the main driver here is the volume.

And growth that has continually exceeded our expectations even through this summer we've.

We've remained cautious on the a S P. As in the guide we don't assume a big step up in any of our products aside from some modest improvement in Sigma terror, driven by the a D L T and the umbrella local coverage decisions.

So for the revenues were assuming continued volume growth across the business and the new products. We are optimistic that our recent launch trajectory can continue in the near term and women's health. We are seeing that contained momentum that Steve described.

1 note on the revenue math for for the guide it's important to recall that we took a 1 time revenue recognition a positive bump of 28.6 million.

In 2.1 this year related to Qiagen, so if you're making the comparison between first happened second half revenues on the guide I I think it's worth stripping that out. The result is you'll see the guide imply significant revenue growth in the second half of this year.

That trend will normalize under the Panama process get you've got offsets to that so can you just walk us through the the longer term ESP trend dynamics here and also how getting that E. D. O T go that can help with the competitive mode with them already for you.

Yeah, sure that'd be great so email T.

Very significant advantage and it's only available to the first mover you know who has an innovative tests on the market. So we're very glad that we were accepted into the.

Into the program and we were able to increase that recurrence monitoring price from 795 now up to $3500 because over time as the flywheel effect of getting patients instead of her current ordering program.

Occurs you're gonna have more and more and more vacations at that recurrence monitoring time point. So it's critical.

That you that you maintain a high S P.

In that time pouring down the way. The program works is is there is a.

There's a time period I believe it's roughly.

9 months, where they they look at your commercial claims during that time could you get paid the list price 3500, and then after that they look at your commercial claims and a reset your price.

Based on the median weighted reimbursement from commercial parties now the good news is that we've been we've been very strict.

Strict about how we negotiate with private pairs and we've successfully negotiated rates that are at or above there's $3500 price point with private payer. So we don't expect to see.

Any price reductions on an ongoing basis through the payment process of course, it has to pay out play out over time, but you know at this stage all the rates, we've negotiated or at $3500 or higher and we expect to maintain the price point or have an increase.

Thank you.

Our next question comes from the line of Tyco Peterson with J P. Morgan still line is open.

Hey, thanks.

First question on the back of the financing and congrats on getting that done can you just talk a little bit more about the M. R. D. A roadmap for multi cancer, even though you talked about for many testing in the near term 9 day longer term, but maybe just talk a little bit about use of proceeds and how do you think you can scale up some of these efforts.

Yeah. So.

There's a lot of work I think to to to roll out each of the different indications. The good news is that the most important thing to being successful in the signature market is generating the right data.

And we started that process of generating the data a long time ago 5 years ago, roughly you look at some of these trials.

Ongoing for that period of time, we had we had teams of people out hunting.

For clinical trials that we could get into the 5 years ago. So now these studies of reading out and they're being published that's the most important thing in order to unlock.

Usage in a particular tumor.

[noise] tumor type is the unlock reimbursement in a particular tumor type. So when we look at where we are in colorectal today stage 2 and 3.

We're seeing a lot of volume come in we're seeing rapid increase in ordering on the clinical side, which is which is great and in line with our expectations. We've now generated this data and illegal metastatic stage for colorectal deepening our penetration colorectal space and that day to look excellent I mean really good.

Data with overall survival as well, which is really the next step down and and kind of.

Raising the bar for what type of data is required to move the needle.

I think we're going to continue to penetrate colorectal.

We're we're on market with an immunotherapy monitoring products, which is going very well received increases consistently in the usage. There. We've also shown Muslim base of blood or a long new adjuvant breast ovarian multiple myeloma now we just had a publication.

<unk> G O cancer, so all of those areas where we.

We're regenerated data and we have published data I think over time will be rolling out those indications.

We're actually seeing usage today and a lot of those indications, even though our sales team does not promoting.

We're just getting inbound requests where doctors read the paper and then they want the test where patients you'll hear about it and they want the test. So we are seeing usage, although the vast majority of our business today is colorectal immunotherapy.

So that's sort of 1 sector the near term kind of $4 million 4 million tests per year opportunity then there's the bigger sector unlocked through these partnerships by formula or with farm and we think that's like breast treatment on molecular current for example, lung treatment on malaria recur.

<unk> and these these these big phase 3 clinical trials take time to read out.

But when they do read out there, they're going to be massive market moving guide.

Guideline changing trials, so it's kind of a great setup, where we have this significant amount of growth and work that we can do in the near term and then when we get to the kind of mid.

[laughter] mid to upper twenties twenties, we had the second wave of extreme growth that unlocked by the investments that we're making today in the trials.

So that's sort of how we see it we see it playing out and the other thing I think is good about these these big trials like for example, the breast 1 that we just announced.

Once the competitive landscape is established here and there's maybe a handful of folks that are participating in these trials.

It's gonna be really hard for others to come behind I mean these are these are 7 year.

5 to second your perspective clinical trials.

These are the types of things that really truly build a competitive note that makes it very difficult for others to.

To come in behind so.

So we feel like we're in a good position in the short term and to tap into that that's very significant.

Upside that it's gonna come in the future.

Thank you.

Our next question comes from the line of Catherine shop with Bert Your line is open.

Hey, guys. Thanks for the question I guess first just on the Guy and he mentioned being cautious on Aspie outlook and not making an a significant increase in an I P. T I guess and Gary shouldn't we see this bump up at some of the plants and updated their policies last year and there's 2 accrual accounting and when do you expect that that might happen in a more meaningful.

<unk>.

Yeah.

Yeah.

Mike why don't you take that yeah, Yeah, no hey, thanks, Catherine from the questions. Yeah. So we we actually from that benefits you kind of if I look back too.

Ts.

Prior to any of those covers decisions last year vs. Now we have gotten a good step up.

T P contracts in terms of the fashion time he'd gotten paid I think that's true primarily in our commercial business, although it's starting to look more and more true for.

Through the Medicaid volume.

As well.

I do think that there is still room to go on that.

N I P. P for any particular, just as I look at the the fraction and claims that.

Are still unpaid for some reason like our prior authorization policy that we could could get removed.

Sure.

Myriad other or the rationale that net parents may ask state Medicaid plans that aren't yet adhering to the new.

Practice guideline for example, so I think there's there's room for that.

<unk>, it's been 3 I think there will be some benefit and just buy them from the accrual as you mentioned you said you'd get more history with more and more pair that there is a kind of a natural momentum to that so there is some modest.

P.

Improvement in the guide there a lot of that though in terms of kind of impact to afcs blended company basis. Just comes from the fact that and we didn't have the ADL T really in a meaningful way and Q2 and we'll have it in Q3 and beyond in.

In 2 weeks and we got Medicare volume.

I'm in.

Colorectal cancer stays between 3 and then we'll get a bump from that and the other pieces that day Mister <unk>, Okay kind of a natural progression.

Now that you have the C D O T.

Seasonable in today's piece that product can improve as you get more and more patients into that kind of a longer tail.

Recurrence monitoring cash vs kind of the upfront tests as well so that some time that can start to gonna put.

From the second half.

August requiring certain amount of forecasting and as most of you know from the company for a while we just trying to err on the side of caution and it relates to the guide and particularly forecasting is P. So it's almost more of a philosophical point than than anything else.

Thank you.

Our next question comes from a lot of them off from Sarah with B T. I D. You line is okay.

Hey, guys. Thanks for the questions and congrats on the quarter the rays and all the data that you've been publishing.

I guess a.

We're gonna be able to transport into other organs and now that this.

This LCD has been put in place, which is essentially an umbrella LCD that will allow us to go get reimbursed if we choose to go into other areas.

So I think the groundwork has all their share.

Proof of concept is there.

And I think we will we'll be in a good position to sort of make those moves in the future. If if if that's an area that we decided to go into I think when we look sort of across the business. We have to kind of decide where we want to make the investments and so forth but.

Certainly the kind of framework is in place there.

On the early cancer detection side.

We basically said that we've developed a platform.

We have some data that looks good.

We have access to a significant number of samples and we're going to package all that up and describe it to everybody in the future when we're ready to.

We just haven't done that yet and so I think that announcements will be coming where we're going to describe what we're doing what we have so far and what our plans are.

But we're just not rolling that out today, but we feel very good about the opportunity we have.

Thank you.

Our next question comes from the line of Dan Leonard with Wells Fargo from your line is open.

I think this is new honest from Penn just quick questions on day, Oh again, and then also oncology Pi.

I think in the prepared remarks, you were talking about there is like are you starting to see a contribution from those 2 that's net can you quantify a little bit and comes from a volume or revenue.

And then also on the women's Health I think you also mentioned a share gain can you also talk a little bit more about the share gain opportunity specially out there 1 of your competitors exit the market. Thank you.

Yeah sure. So why don't I talk about the share gain and then maybe Mike you can talk about like how we're managing breaking stuff out.

So on the women's health side.

We have been.

And then just crushing it.

We're accelerating.

You can see EBITDA growth over over the last couple of years and sort of what we're doing now I mean, it's a whole different level of growth. So we're in a fantastic position.

Got a great technology, we've made significant improvements to the technology that have been launched this year with Panno AI, that's playing out very very well in the field.

Great customer feedback, we've now got the largest.

Prospective trial, that's ever been done in the field at <unk>, where the Brazil real world setting held up and.

And actually were better than our validation data.

So that's that's super strong I think some of the big academic centers and maternal fetal medicine practices that hadn't been using us before considering a switch are now looking at the data in and they are excited about it because this time from this quality of data just hasn't been.

It Hasnt been produced before so yes, we are having competitive wins, but we're also seeing the market penetrate.

And so those 2 things simultaneously happening or are causing an acceleration in the women's health growth the market today, we believe it's about 30%.

Maybe 35% overall penetrated so there's a long way to go just simply riding the wave of penetration in the market and even if we werent seeing competitive wins, our business would grow just simply from penetrating that market. We think in the next 3 years net.

<unk> market is going to get to 90% growth or excuse me, 90% penetration.

So that's that's a very significant growth, but on the competitive side.

We're outpacing everyone else from a growth standpoint.

We're taking business from competitors.

You saw 1 main competitor exited the market and they were very strong competitor for a long time.

When they announced.

Our sales team went to work and we've done exceptionally well.

I think converting net business to deterrent based on the numbers. We're seeing we believe we got more than our share.

Of that business. So we're feeling very good about that.

I think we're in a good position.

So Mike you want to maybe comment just on how we're breaking out.

Oregon health or oncology from a unit and revenue standpoint.

Yes, Catherine our plan has been just described.

Describe the business on a total company basis now that's largely for competitive reasons as it relates to the new product launches we've had the experience from the past of giving.

They're gaining share and disclosure.

It's easier for us and easier for you all I appreciate it but we've seen it time and again actually harm the opportunity as competitors are able to kind of dial into exactly how well we're doing and then redouble their efforts. So we're not inclined to.

Give that at the moment I think the other piece is that we're still relatively early in these launches when you were a little over a year or 6 months in Oregon housing and cemetery, respectively, If you're still getting a handle on exactly what does.

The launch trajectory what do you think that could look like in these businesses as sales and so I mean over the relative near term I think we'll be in a position to Iran.

Give more to get more color. There I think total company basis. So you can kind of see you start to see some of the impact.

The beef.

But all of the businesses.

And kind of ahead of internal expectations, you don't raise guide from a $100 million from 500 to 525 to over $600 now $600 million for total revenues.

We got some new cash really launching a met your expectations.

So I think you can see that in the guide in all stages of the product revenue growth year on year. So clearly, it's having an impact from the business and stay tuned.

Thank you.

At this time I would now like to turn the call back over to management for closing remarks.

Great. Thank you very much for joining the call today, we appreciate it take care.

Thanks, everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

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